Federal budget 2026-27: Key tax changes every Australian business should know
The 2026-27 Federal Budget introduces several tax changes that could affect how Australian businesses invest, manage cash flow and plan for future growth. While some measures provide immediate tax savings, others will require businesses to review their structure and long-term tax strategy.
From the permanent $20,000 instant asset write-off to upcoming changes to Capital Gains Tax (CGT), discretionary trusts and PAYG instalments, understanding these updates now can help you avoid unexpected tax outcomes and take advantage of available concessions.
Here, we will explain the most important Federal Budget 2026-27 tax changes, what they mean for your business, and the practical steps you can take to prepare.
Key takeaways
The $20,000 instant asset write-off is now permanent for eligible small businesses.
The 50% Capital Gains Tax discount will be replaced from 1 July 2027.
Discretionary trusts will face a new 30% minimum tax from 1 July 2028.
PAYG instalments will become more flexible, with optional monthly payments from 2027.
Businesses using vehicles or machinery should review the latest Fuel Tax Credit rates to maximise claims.
Reviewing your tax strategy early can help reduce costs and take advantage of the new Budget measures.
Federal budget 2026-27: Key tax changes for business
This year's Budget delivers real wins for small business cash flow, alongside some significant structural changes worth planning for early. Here's what's changing and what it means for your business.
Let's break down each of these changes in more detail below.
The $20,000 instant asset write-off is now permanent
After years of the instant asset write-off being re-announced (and sometimes renewed at the last minute), it's now a permanent fixture for small businesses with a turnover under $10 million.
From 1 July 2026:
- Eligible businesses can immediately deduct the cost of assets under $20,000
- This applies in the year the asset is first used or installed, ready for use
- The $20,000 threshold applies per asset, not as a total across all purchases
- Permanency alone is expected to save small businesses around $32 million a year in compliance costs
Instant asset write-off example
Take Bean & Batch, a café run by a company. For the 2026-27 financial year, the business is forecasting around $40,000 in taxable profit.
The owners are planning to invest in growth by purchasing a new coffee machine, tables, and outdoor heaters, totalling $55,000. Because the $20,000 instant asset write-off is now a permanent rule, they can claim the full $55,000 as an immediate tax deduction as soon as the equipment is bought and used.
By claiming this $55,000 deduction against their $40,000 profit, the business reduces its taxable income entirely and ends up with a $15,000 tax loss for the year. This means the café pays $0 in income tax for 2026-27.
| Item | Amount |
|---|---|
| Forecast taxable profit | $40,000 |
| Instant asset write-off deduction (equipment) | ($55,000) |
| Taxable income after deduction | $0 |
| Tax loss for the year | ($15,000) |
| Income tax payable for 2026-27 | $0 |
The capital gains tax (CGT) changes
If you sell an investment property, shares, or another investment asset after 1 July 2027, the Capital Gains Tax (CGT) rules may change.
- The four small business CGT concessions are staying, with over 90 per cent of Australia's active businesses continuing to be eligible: the 15-year exemption, the 50 per cent active asset reduction, the retirement exemption, and the active asset rollover concession.
- From 1 July 2027, the flat 50 per cent CGT discount is being replaced by a new discount for inflation and a 30 per cent minimum tax rate on real gains, but this only applies when a relevant business asset is sold.
- Past gains are not affected. The new rules are entirely prospective, so any business value built up before 1 July 2027 keeps the old 50 per cent discount, no matter when it's eventually sold.
- Selling your business name, client database, commercial real estate, or business goodwill triggers a CGT event and will have the new discount for inflation applied from 1 July 2027, alongside access to the small business concessions if eligible.
- Everyday tools of trade, such as work vans, computers, or tools, are not subject to CGT; they are handled through standard income or deductions.
- To access the small business CGT concessions, your business needs an aggregated annual turnover of less than $2 million, or net assets under $6 million.
Loss carry-back and loss refundability are boosting cash flow
Companies with an aggregated annual global turnover of up to $1 billion can use the proposed loss carry back tax offset to carry back eligible revenue tax losses and offset them against income tax paid in either or both of the two previous income years. The measure was announced in the 2026-27 Federal Budget and is proposed to apply to income years starting on or after 1 July 2026.
- Around 85,000 companies are expected to benefit, most of them small businesses
- Going back to the Bean & Batch example: after generating a $15,000 tax loss, your business can apply this loss against the tax you already paid in the previous year. Because your small business tax rate is 25%, this instantly generates a $3,750 cash refund from the ATO.
- That's real cash landing back in your business at exactly the point you are investing to grow. Working with business tax return specialists can help you determine whether your business is eligible to claim these refunds.
There is also a measure aimed specifically at your start-ups:
- Your startup refunds: From 2028-29, small startup businesses in their first 2 years of operation will be able to get a refund for tax losses.
- Capped at employment taxes: The refund is up to the amount of fringe benefits tax and withholding tax paid on employee wages.
- Your payroll relief: This is highly useful if you are hiring staff before your business starts turning a profit, making small business payroll services even more valuable as your team grows.
Don't leave a possible refund on the table. Talk to our tax experts and find out where your business stands.
A new $250 tax offset for workers and sole traders
Starting from the 2027-28 financial year, the Government is introducing a new $250 working Australians tax offset:
- A permanent annual tax offset of up to $250 for income earned from work
- Applies to over 13 million Australian workers, including sole traders running their own business
- Lifts the effective tax-free threshold by nearly $1,800, to $19,985 (or up to $24,985 for workers who also get the Low Income Tax Offset)
- Applied automatically once you lodge your tax return, no separate claim needed
Research and development tax incentive reform
From 1 July 2028, the R&D Tax Incentive is being reformed to make it easier to use and better targeted, with the government aiming to unlock a further $400 million in R&D spending by young businesses each year.
Key changes include:
- Increasing the offset for experimental "core" R&D by around 25 to 50%
- Lifting the turnover threshold for the higher refundable offset to $50 million
- Extending refundability to businesses operating for less than 10 years
- Requiring smaller R&D projects under $50,000 to be run in partnership with a recognised research organisation to qualify
A 30% minimum tax on discretionary trusts, with rollover relief
From 1 July 2028, a 30% minimum tax will apply to discretionary trust setups, aimed at making the tax system fairer across the board.
- Primary production income is excluded
- Fixed trusts and charitable trusts are also excluded
If your business runs through a discretionary trust and this concerns you, there's a window to act:
- New rollover relief is available for three years from 1 July 2027 for small businesses wanting to restructure into other arrangements, such as a company or a fixed trust
- The Australian Small Business and Family Enterprise Ombudsman will help small businesses work through their options
- Businesses that restructure into a company gain access to a lower 25% corporate tax rate (for those with an aggregated annual turnover under $50 million) along with dividend imputation, meaning shareholders can receive franking credits for tax already paid by the company.
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More flexible PAYG instalments
The government is making it easier for small businesses to adjust their pay-as-you-go instalments as conditions change. Maintaining an accurate book of accounts through a professional online bookkeeper can help ensure your PAYG obligations reflect your business's current performance.
- From 1 July 2027, small businesses will have the option to report and pay PAYG instalments monthly, rather than the current quarterly cycle, improving cash flow flexibility.
- The Australian Taxation Office (ATO) is expanding its dynamic PAYG instalments pilot, which uses accounting software to calculate instalments more accurately based on real-time business performance.
- Businesses with a history of non-compliance will be required to report and pay instalments monthly, rather than having this as an optional choice
Fuel cost relief
To help reduce operating costs for Australian businesses, the Government introduced temporary fuel relief measures in 2026.
- Fuel excise was reduced from 52.6 cents to 20.6 cents per litre from 1 April 2026 to 30 June 2026, helping lower fuel costs for businesses that rely on vehicles.
- The heavy vehicle road user charge was reduced to zero from 1 April 2026 to 30 June 2026, providing additional support for transport and logistics businesses.
- Fuel tax credit rates changed from 1 July 2026. For fuel acquired between 1 July and 2 August 2026, eligible businesses can claim the rates given below:
| Fuel Tax Credit Rates (1 July - 2 August 2026) | |
|---|---|
| Fuel Use | Rate (cents per litre) |
| Diesel or petrol used in heavy vehicles travelling on public roads | 20.2 |
| Diesel or petrol used for other eligible business purposes (machinery, generators, auxiliary equipment) | 36.6 |
Less red tape and fairer competition
Alongside the tax measures, the budget delivers:
- $10.2 billion a year in regulatory burden reduction.
- Removal of another 497 "nuisance tariffs".
- A tell-us-once approach, so businesses don't have to keep supplying the same information to the government multiple times.
- ACCC maximum penalties for anti-competitive and anti-consumer conduct are doubling from $50 million to $100 million.
- More protection for small suppliers through the Food and Grocery Code Education Program and an overhauled Payment Times Reporting Scheme aimed at getting small businesses paid faster.
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Federal Budget 2026-27: Key tax change timeline
The key Federal Budget 2026-27 tax changes won't all take effect at the same time. While some measures apply from 1 July 2026, others will be introduced over the following two years. Use the timeline below to see when each change begins and understand what it could mean for your business.
| Start Date | Budget Change | What it means for business |
|---|---|---|
| July 1, 2026 | Permanent $20,000 Instant Asset Write-Off | Eligible businesses can immediately deduct qualifying assets costing less than $20,000. |
| July 1, 2026 | Company Tax Loss Carry-Back | Eligible companies can offset current-year tax losses against tax paid in either of the previous two income years. |
| July 1, 2026 | Updated Fuel Tax Credit Rates | Businesses using eligible vehicles, machinery and equipment should review the new claim rates. |
| July 1, 2027 | Capital Gains Tax (CGT) Changes | Future capital gains will be calculated under the new inflation-based method, subject to the proposed rules. |
| July 1, 2027 | Optional Monthly PAYG Instalments | Eligible small businesses can choose monthly PAYG payments instead of quarterly instalments. |
| July 1, 2027 | Trust Restructuring Rollover Relief Begins | Eligible businesses have a three-year window to restructure before the new discretionary trust rules apply. |
| July 1, 2027 | $250 Tax Offset | Eligible workers and sole traders can receive an annual tax offset of up to $250 when lodging their tax return. |
| July 1, 2028 | 30% Minimum Tax on Discretionary Trusts | Businesses operating through discretionary trusts should review their structure before these changes commence. |
| July 1, 2028 | Research and Development (R&D) Tax Incentive Reforms | Eligible businesses investing in innovation may benefit from enhanced R&D tax incentives. |
| July 1, 2028 | Loss Refundability for New Startups | Eligible startups in their first two years may be able to claim refunds for tax losses, subject to the announced rules. |
Federal Budget 2026-27 checklist for Australian businesses
Here's a simple checklist to work through:
- Asset purchases: plan upgrades or purchases around the now-permanent instant asset write-off, and think about timing if you want to use loss carry-back as well.
- Cash flow: if your business has had a loss-making year, check whether loss carry-back could get you a refund on tax already paid.
- Trust structures: if you are running a discretionary trust, start the restructuring conversation now; the rollover relief window is generous but time-limited.
- R&D: If you are investing in research and development, revisit your eligibility once the reformed incentive lands in 2028.
- PAYG instalments: consider whether monthly or dynamic instalments would suit your business better once available from 2027.
- Fuel and cost pressures: check the latest Fuel Tax Credit rates if your business uses vehicles, machinery, or equipment, since rates changed from 1 July 2026.
- CGT and asset sales: if you are planning to sell an active business asset, property, or shares, review timing against the 1 July 2027 changeover, since gains before that date keep the old 50% discount.
- Red tape and reporting: keep an eye on the "tell-us-once" rollout so you are not stuck re-submitting the same information across government agencies, and check whether the Payment Times Reporting Scheme changes affect how quickly you get paid by larger customers.
Federal budget 2026-27 FAQs
1. What happens if an asset costs $20,000 or more under the permanent rules?
Assets costing $20,000 or more cannot be written off immediately. They are added to the Small Business Simplified Depreciation Pool, depreciating at 15% in Year 1 and 30% each year after. If your pool balance drops below $20,000 at the end of any financial year, you can immediately write off the entire remaining balance.
Example: You buy a $30,000 van in Year 1:
- Year 1: Claim 15% ($4,500 deduction), $25,500 balance left.
- Year 2: Claim 30% ($7,650 deduction), $17,850 balance left.
- Low-Pool Write-Off: Because $17,850 is under $20,000, you write off the full $17,850 at the end of Year 2, bringing the pool balance to $0.
2. Are sole traders or trusts eligible for the loss carry-back cash refund?
No. The loss carry-back scheme applies exclusively to incorporated entities (companies). Sole traders, partnerships, and trust entities cannot carry back losses to generate a tax refund, though sole traders can continue to offset or carry forward losses against future individual income under standard non-commercial loss rules.
3. What triggers the new CGT rules on business assets, and how are historical gains protected?
The new CGT indexation method and 30% minimum tax apply only to CGT events (such as selling business goodwill, commercial property, or client lists) occurring on or after 1 July 2027.
Capital growth accrued prior to 1 July 2027 is protected under transitional rules: you can obtain a formal valuation as of 30 June 2027 or use an ATO-approved apportionment formula to preserve the original 50% CGT discount on pre-July 2027 gains.
4. Can paying wages to family members help avoid the 30% minimum trust tax?
Yes. If family members genuinely work in your business, paying them regular employee wages or salaries instead of trust distributions means those payments will not attract the 30% minimum trust tax.
5. How is negative gearing changing for property investors?
From 1 July 2027, negative gearing deductions against non-property income (such as salary and wages) will be limited strictly to new residential builds. Investors who purchase existing dwellings after Budget night will no longer be able to offset rental losses against their primary income. Existing property arrangements will remain grandfathered.
6. What changes are happening to Fringe Benefits Tax (FBT) on Electric Vehicles (EVs)?
The full FBT exemption for zero-emission vehicles will be phased out for new arrangements:
- 2027-28 and 2028-29 FBT years: EVs under an affordability threshold of $75,000 retain the full FBT discount. EVs priced between $75,000 and the Luxury Car Tax threshold receive a reduced 25% FBT discount.
- 2029-30 onward: All eligible EVs below the Luxury Car Tax threshold transition to a 25% FBT discount.
Existing EV leases will remain grandfathered under previous rules.
Talk to our small business accountant about the 2026-27 changes
There's a lot in this Budget, and most of it is designed to work in your favour if you plan for it properly. The trouble is that "plan for it properly" is exactly the part that's easy to put off when you are busy running a business.
This is where a good accountant earns their keep. At CleanSlate, we help small businesses across Australia make sense of changes like these instead of leaving it to guesswork, whether that's timing an asset purchase, working out if loss carry-back applies to you, or thinking through whether your trust structure still makes sense. You can see our full range of accounting services here, or learn more about our team.
If any of this raises questions about your own business, book a free call with our team or call 1800 96 50 90. We will help you turn this year's Budget into a plan instead of a guessing game.
